Zambia's rural electrification in top gear

Wednesday, 23 June 2010 09:30

Zambia has launched a K6 trillion Rural Electrification Master Plan (REMP) scheduled to run up to 2030 aimed at stimulating rural industries and combating poverty.

The Japanese International Cooperation Agency (JICA) provided a $50 million soft loan.Speaking at the launch in recently, Minister of Energy and Water Development, Kenneth Konga disclosed that $50 million will be required annually to implement the plan covering 1,217 rural growth centres identified for electrification throughout Zambia and the development of 29 mini hydro sites in the Northern, Luapula and North-Western provinces.The REMP, which started in 2008, will enable Government coordinate rural electrification in a systematic and transparent manner on priority basis.“For a long time in this country, rural electrification has been implemented on an unplanned and ad hoc basis. Electricity is a key driver to the improved quality of life, development of human capital and capacity in our countryside. Rural electrification will further ensure that our rural areas benefit from information technologies,” Mr Konga said.The government will use the plan to pursue clearly defined rural electrification targets of increasing the electricity access rate from the current three to 51 per cent by 2030. The programme is poised to unlock the great potential that exists in agriculture, tourism, mining and the agro-industrial potential in rural areas where most people reside.According to Japan’s Minister Counsellor in Zambia Toshihiko Horiuchi, the objective of REMP is to draw a master plan for electrification in Zambia and bring about a technology transfer to Zambians so that they can continue updating and implementing the project.The plan consists of four elements which are the rural electrification plan up to 2030; the financial plan for rural electrification, policy recommendations for acceleration, dissemination and the development of a comprehensive programme.The overall electrification rate in Zambia stands at 20.3 percent with urban areas having a higher rate of 47.6 per cent and rural areas 3.1 per cent. In line with Vision 2030. It is envisaged that the electrification rate will increase to 66 percent overall: 90 percent in urban areas and 51 percent for rural areas.The governments of Sweden and the Netherlands are providing $40 million (ZMK 205 billion) to the Rural Electrification Fund (REF) over five years.

Capacity and potential

Zambia has installed an electricity generation capacity of 1,786 MW and an undeveloped hydropower potential of over 6,000 MW. Demand has been growing at a steady pace over the years and has outstripped supply, mainly from 2008 due to increased mining activities and a developing industrial base.In rural areas, electricity could be harnessed for crop irrigation, agro-processing, small-scale mining and to facilitate tourism. However, rural electrification (RE) faces numerous challenges such as long distances from existing power stations to targeted rural areas, low population densities, high poverty levels and low skills availability.Measures undertaken so far to facilitate access to electricity in rural areas of Zambia include the adoption of a new National Energy Policy (NEP) in 1994. The NEP was aimed at facilitating increased access by liberalizing and restructuring the electricity market and promoting the use of low-cost technologies and decentralized renewable energies. To facilitate implementation of the new policy, the government established a legal and institutional framework by enacting new legislation, namely, the Electricity Act and the Energy Regulation Act in 1995. The Electricity Act provided for the liberalization and regulation of the electricity sector, while the Energy Regulation Act provided for the establishment of an independent regulator so as to stimulate private sector participation and efficiency. In addition, a Rural Electrification Fund (REF) and associated mechanism was established in 1995. In 2003, the government enacted the Rural Electrification Act leading to the establishment of an agency dedicated to RE – the Rural Electrification Authority (REA).The development of mini hydro power stations in areas where the potential exists had been identified as one of the methods of rural electrification. Mr Konga has also implored REA to seek alternative sources of energy supply to enhance rural electrification.“In the current environment of a power deficit situation, we need to look at all the available renewable energy sources and utilize them to the fullest to meet the electricity needs of our rural population,” he pointed out.In October 2008, the Government signed an agreement with the World Bank under which a $33 million credit line would be available to support the electrification programme in Zambia. About $19 million of the credit will go towards supporting rural electrification projects which include grid extensions, installation of solar photovoltaic systems and construction of mini-hydros. Another $10 million Euro grant from the European Union will also be provided to support rural electrification projects.Meanwhile, REA would this year spend about $9.1 million to complete the electrification of several districts in northern and western Zambia, the authority’s spokesperson Justin Mukosa has revealed.In addition to the REMP, the government has developed the Power System Master Plan (PSMP) which consists of three major components: the plans for optimal generation, transmission systems and inter-connectors.The major distribution network falls under the Zambia Electricity Supply Corporation (ZESCO), the national power utility, which was successfully commercialized in 2005. The firm operates and maintains a high voltage transmission system which is responsible for all electrical power imports and exports in the country and provides retail services to all but the largest mining customers on the Copperbelt. Copperbelt Energy Corporation (CEC) is the sole distributor of electricity to the major mines in Zambia. CEC buys electricity from ZESCO under a bulk supply agreement that expires in 2020.The main sources of energy in Zambia is hydroelectric power, most of which comes from the Kafue Gorge (990 megawatts) and Kariba North Bank (600 megawatts). Hydro power stations supply the national grid while diesel power generating plants supply isolated loads, mainly in remote areas not connected to the grid.With the completion of the ZESCO power rehabilitation programme in 2009, an additional 210 megawatts in capacity has been added to the power generation. Energy supply however, still remains a major constraint to the growth of the Zambian economy. In particular, ageing transmission networks and increasing demand for energy have created the potential for significant shortages in electricity supply over the medium term.In order to address these issues, the Government has commenced the development of the Kariba North Expansion Project, which will bring 360 megawatts in additional generation capacity. Further, the development of the Itezhi Tezhi, Kafue Gorge Lower power projects, which will add between 770 and 870 megawatts to the existing capacity, is also expected to commence shortly. All these projects are expected to begin after 2012.In the 2009-2011 Medium Term Expenditure Framework (MTEF), the Government announced its intentions of promoting a number of mini-hydro power projects over the medium term. This is now underway, with the development of mini-hydro projects in Lunzua, Chishimba, Lusiwasi and Musonda Falls expected to commence shortly. In addition, private sector development of hydropower projects in Kabompo and Kalungwishi are expected to commence in 2011 and will add 235 megawatts when completed. In view of the vast untapped hydroelectric energy potential in Zambia, the focus over the medium term will shift towards inviting greater private sector participation in the energy sector. This will be undertaken by engaging the private sector through the development of public private partnerships (PPPs) and power purchasing agreements. Incentives to this end have already been announced in 2009, with the granting of 100 percent capital allowance to electricity generation investments.Greater private sector participation in the energy sector still remains hindered by the level of electricity tariffs. To address this, the government in 2009, announced that electricity tariffs would increase to cost-reflective levels by 2011. These tariff increases are essential not only to improve the performance of ZESCO, but also to attract additional private investment in the sector. In this regard, average tariffs were increased by 36 percent in 2009, and an indicative increase of 26 percent has been announced for 2010. The Government remains committed to ensuring that electricity tariffs reflect the cost of service delivery. Simultaneously, it will also continue to engage with ZESCO on the improvement of its Key Performance Indicators (KPIs).And Maamba Collieries, which until recently operated as a parastatal and has been successfully privatized, has signed a Heads Agreement on Power Purchase Agreement (PPA) with ZESCO for the uptake of coal fired thermal electric power earmarked for generation by the planned Thermal Power Plant to be set at the Mamba mine site.Indeed, improvement of supply and access to electricity remains a key strategic focus for the government. Indications are that there is a sustainable ‘light at the end of the tunnel’ on this score.